Malternatives

With the FDA cracking down on caffeine/alcohol hybrids, Anheuser-Busch’s Smirnoff and Bacardi brands losing sales, and wine coolers fading into a distant memory, the alternative malt beverage category looks about as hospitable as a beach during a blizzard.

Unless, it seems, you’re Mike’s Hard Lemonade.

While Anheuser-Busch InBev declined to comment on this article – not even to announce new products – Philip O’Neil and Chris Mahoney, Mike’s president and director of brand marketing, respectively, happily chatted about its endeavors to stretch the brand into new usage occasions while keeping true to its chilled-out core. Having established itself as a standard offering at summer time barbecues, the brand has turned its attention toward stretching its usage occasions deeper into the year and deeper into the night.

But that shouldn’t be surprising, as Mike’s probably would rise and fall with the category; malternatives are all they do. And in the past year, Mike’s has added a two-SKU canned line, a punch line (no joke intended) and a seasonal line. The seasonal line was named by Information Resources Inc. as the third-fastest-growing beer product of the summer.

As a private company. Mike’s is under no requirement to reveal internal sales numbers, but the company insists that the new products have added incremental sales for both itself and its retailers.

What data is available also paints an incomplete picture. According to IRI, Mike’s new products are rising, but not enough to cancel out an 8.5 percent loss in its core offerings for the 52 weeks ending Nov. 1, in supermarkets, drugstores, convenience stores and mass market retailers excluding Wal-Mart. That data, though, contains two glaring blind spots. Company spokeswoman Chris Mahoney said the company has found recent success at Wal-Mart, which stocks all five of the brand’s new SKUs, and continues to perform well in liquor stores. Neither of those channels appears in IRI’s data.

Even that limited data, though, shows Mike’s holding firm against its biggest competitors. The past year hurt the alternative malt beverage category and traumatized big brewer brands. The category slipped 1.4 percent, according to IRI, while $20 million line extension Smirnoff Ice Triple Black dropped 20 percent and Bacardi Silver Mojito, another $20 million line, dropped nearly 24 percent. Even worse, those brands that have made headway have done so under the angry glare of government regulators Joose, Four and Twisted Tea have all grown sales by blending caffeine with alcohol. A-B and MillerCoors already pulled caffeine from Tilt and Sparks, and, correspondingly, those brands have suffered double-digit declines.

A-B and MillerCoors withdrew their caffeinated formulas in 2008 after a coalition of state attorneys general requested they do so for public health reasons. The coalition announced at the time that it planned to pressure smaller brands to do the same. In November, the U.S. Food and Drug Administration followed up on that threat, notifying more than 20 manufacturers of caffeinated alcoholic beverages that it intended to look into both the safety and legality of those products.

Mike’s escaped that bout of scrutiny by staying away from caffeine. As Sparks became a staple at college parties, Mike’s considered jumping on the stimulant train, Mahoney said, but “it didn’t really fit with our image.” Amid the current environment, that decision seems smarter than ever. Instead of fretting over a federal inquiry, Mike’s has focused on efforts to expand beyond its sweet spot of warm afternoon gatherings populated by grills, lawn chairs and Frisbees.

“We’re pretty skewed toward summer,” Mahoney said.

To push the brand deeper into the year, Mike’s recently rolled out a seasonal product, a winter-friendly, spiced “hard” apple cider that can be consumed cold or hot. The company also tried to expand its demographics with its new Mike’s Hard Punch line, which Mahoney said skews younger than the rest of the brand. In the new year, the company will roll out a line of bottled margaritas aimed to expand the brand’s usage occasions into late-night gatherings.

Ten years out from its lemonade-only roots, Mike’s is no stranger to bottled cocktails. It previously released Mike’s Cran-Tini, Mike’s Screwdriver and others, but will now focus on margaritas – what Mahoney called “America’s favorite cocktail” – with a dedicated sub-brand.

The line will feature three flavors – original, raspberry and peach – and no tequila. The new line uses the same malt base as the rest of its products, with agave syrup and lime juice to round out the flavor one expects from a salt-rimmed margarita glass. Mahoney said the company will advertise the line with a campaign including local print and radio advertising along with online media.

The company will have to wait for the sales returns to find out if margaritas will help the brand’s continued success, but the measuring stick might change in the near future. With Mike’s biggest competitors in free-fall, and the fast-growers staking their brands on caffeine mixtures, Mike’s could find itself as the only major player left active in the segment. A-B and MillerCoors’ lines will likely persist – heck, MillerCoors continued to market Zima long after the brand became a punch line – but right now, innovation appears to be taking a back seat. Amid their international mergers, those companies have had other things to think about, which may be contributo to Mike’s’ strong footing.

“We’re so focused on [the segment,]” Mahoney said. “It’s easier for us to see those opportunities to expand the brand.” •